What Is Cash For Clunkers?

$4,500 For a New Car Could Be Coming Your Way

Car manufacturers have been holding on for dear life and coming up with creative ways to sustain their businesses during the recession. The economy has already driven major car companies to bankruptcy, and President Obama is close to signing a measure that would afford more Americans the ability to purchase new vehicles and hopefully prevent more damage to the auto industry.

The $1 billion "cash for clunkers" measure would provide credits to car buyers who trade-in their vehicles for more fuel efficient models. Assuming Obama's anticipated signature, car dealers could begin honoring the rebates worth up to $4,500 beginning July 1. Learn more about the legislation when you

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Trading in a vehicle getting 18 miles per gallon or less for one getting at least 22 mpg: $3,500 voucher.

Customers could get an additional $1,000 (so $4,500 total) if the new car’s mileage is 10 mpg higher than the old vehicle.

Trading in sport utility vehicles, pickup trucks, or minivans for a new truck or SUV: $3,500 if new vehicle gets at least 2 mpg higher than old one; $4,500 if mileage is 5 mpg higher.

The program makes sense for people driving cars with trade-in values less than $3,500 or $4,500, and the program's critics argue that despite the vouchers, people driving these types of cars won't be able to take on new car payments. Car dealers, however, think the program will lure shoppers in and they plan to combine the government vouchers with other incentives.

The thing is, you could probably save a lot more than $4500 if you just buy a later model used car vs. a brand-new one. We're looking to get a more fuel-efficient car and it seems that the used models we're looking at are more than $4500 cheaper than a new one, so the stimulus is kind of useless to us.